My kids are finished with college, but how are you college boys...and your parents...getting through the process?


I met a young girl a few months ago who was going to graduate with loans over $100,000. When I asked her about working and repaymenty plans, her reply was: "Well, I'm going to grad school and if I can get a job paying $100,000 when I finish, I'll be ok!" I was left speechless! Her major was something in literature or language iirc.

As college costs rise, loans become harder to get


By David Cho
Washington Post Staff Writer
Monday, December 28, 2009

When Daniel Ottalini entered the University of Maryland in 2004, his family had an array of choices to cover the cost -- cheap student loans, a second mortgage at low rates, credit cards with high limits and their own soaring investments.

By the time his younger brother, Russell, started at the University of Pittsburgh this fall, the financial crisis had left the family with fewer options. Russell has had to juggle several jobs in school, and the money he could borrow came with a much higher interest rate that could climb even further over time.

The upheaval in financial markets did not just eliminate generous lending for home buyers; it also ended an era of easy credit for students and their families facing the soaring cost of a college degree.

To pay for higher education, most Americans had come to rely on a range of financial products born of the Wall Street boom. Nearly all of these shrank or disappeared in the storm that engulfed the stock and debt markets.

Lenders have raised rates and tightened standards, dramatically limiting the availability of home-equity loans and private student loans. College savings accounts, known as 529 plans, had acute losses in the downturn. And a new law, set to take effect Feb. 22, will bar students younger than 21 from getting credit cards on their own.

Loans offered with federal backing were the lone form of student debt to expand, but only because the government stepped in last year to prevent this business from collapsing under the pressure of the credit crunch. Still, the most common type of federally backed loan has a limit of $5,500 a year, not enough to pay for most four-year programs.

Even as the financing options have narrowed for families, college expenses are rising faster than ever as schools suffer from endowment losses and cuts in state funding because of the financial crisis and the recession that followed.

Last month, California's public universities announced that tuition fees would rise by 32 percent, sparking student demonstrations across the state. University of Virginia officials said a 15 percent cut in state funding for higher education will also force them to significantly raise tuition.


Some educators are concerned that the new price tags will discourage poor students from applying and will price out middle-class families that make too much to obtain financial aid, but not enough to easily afford college.

"It's not only the credit model that has changed; the basic financial model of higher education has also become challenged," said Anthony Marx, president of Amherst College in Massachusetts. "We were already concerned that middle-class students were getting squeezed by racking up debt that could constrain their career choices after they graduate. All of that comes under more strain in these new circumstances."

Other educators worry that students will be forced to compromise on their education.

Russell Ottalini said he choose the University of Pittsburgh because he judged that it would be best for his Japanese-language studies. He relied on his parents to borrow money for his education. But he acknowledged that economic times are tough and said he is willing to transfer to a cheaper school if one parent gets laid off, even if it means attending a lesser program.
"My dad told me I should go to college where I wanted to go," said Russell, 19, whose family lives in Silver Spring. "But not only do my parents have to co-sign for most of my loans, they have to watch one of their sons take on immense amount of debt."

While public universities had little to do with causing the financial crisis, they are suffering its consequences.

To help close a record $60 billion gap in the state budget triggered by the real estate downturn, for instance, California announced $800 million in cuts to the University of California system of 10 schools. In the past two years, a fifth of the system's state funding has vanished. An additional $1.3 billion in reductions is expected next year.

In response, the system's board of regents announced in November the 32 percent increase in tuition, taking effect next year.

After the decision was made, armed police in riot gear had to protect officials from protesters. Students took over classroom buildings at Berkeley, Los Angeles and Santa Cruz, barricading themselves inside. Dozens of students have been arrested. Then, earlier this month, about 70 students and activists surrounded the home of Berkeley's chancellor while he and his family were sleeping, smashing light fixtures and windows and throwing torches at the house. .....................

http://www.washingtonpost.com/wp-dyn/content/article/2009/12/27/AR2009122702116.html?nav=hcmodule

I really don't like the idea of college loans, they cause you to start out with too much debt. As much as I would like to see my kids have the "life lesson" of paying for their own educations, I've told them I would pay for it.

When I was in college 30 years ago, I was able to pay my tuition with a minimum wage job; unfortunately those days are gone. If you really want a surprise, look into the cost of private secondary schools.

Regarding the person with the $100k loan, she is more likely to start at $50k per year and spend 10 years paying off her loans. Is unfortunate because it forces students to treat college as a trade school to recover their investment.

And add in the fact tuition is going up and return is going down.

I went to a private university (U of R) and the tuition was $4200. at that time, IIRC.

Total cost for four years with room and board was $24k..........less some financial assistance. I was able to graduate with almost no debt.

Today, the same school gets $45K for the same miserable education...........it's unconscionable.

Leaving such a school with $125K debt puts the graduate severely behind the financial curve for many years into the future.

My wife's niece and husband currently have over $1 million in college loans. She is a veternarian and he is in about the last year of residency in neurology. With their expected combined income, they will probably pay it off in a few years.

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Behind every great man is a great woman. Behind every great woman is a great behind.

I seriously doubt it. Those that graduate with a medical degree don't make any serious money for at least 10 years.

Their combined income for the first five years probably won't exceed $200K. Making a dent in $1M is going to be a long and arduous task. The interest alone is probably $30K per year.

I understand a starting vet averages only $50K. But she works in animal testing at a human hospital and started at $100K about three years ago. He has been offered (and will likely accept) a faculty position at a major university starting at $350K. They're both exceptional in their fields.

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Behind every great man is a great woman. Behind every great woman is a great behind.

Until I see the actual paycheck............I'm not buying it. No university hires a person fresh out of school for $350K.

Agreed, I paid about $2000 per year at a public university ($2.50 per hour at a time), now public universities are in the $15-25K range (a factor of 10), while the ability of a student to earn money has only increased by a factor of about 4. It is not clear to me why the cost of education has risen disproportionately to the rest of the economy?

In any case, I would advise anyone to avoid debt with few exceptions, such as buying their first house, but unless their parents can/will write a large check they might not have a choice.

My son is a Junior this year so we have started looking into colleges and finances. As a retired teacher and farmer, I never put away a lot of money for his college, but we will be able to help some. Fortunately, he is a bona fide member of TWO different minority groups. His tribal membership qualifies him for scholarship money from his tribe, in addition, he's eligible for scholarships thru several latino organizations. He's a member of the National Honor Society and carries a very high GPA.(as a teacher's son, the poor kid didn't have any choice in being a good student) Several schools with native american financial aid money to spend have already started to schmooze him.
As an educator, I know that there are tons of scholarships nationwide that go unclaimed each year. I also know that high school guidance counselors can be p!ss poor at helping kids maximize their search for funds. They're overburdened with too many kids and often aren't very well trained. It's really up to parents to help their kids get all the financial aid they can. A student with a great high school record shouldn't look at loans as a first option, even with costs as high as they are these days. An excellent book to read for anyone starting on a college search or even just interested in the subject is the book "Colleges That Change Lives". Get it on Amazon, the author also has a website.

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I went to a private university too. Tuition there for a year was about 1800 per year when I started. Maybe about 3,000 when I finally graduated. I didn't have any debt when I finished. I paid for my liviing expenses out of the GI Bill money I received and the 'rents paid the tuition. Lucky for me.

"Unconscionable" is too polite a word. Screwin' them with their pants on is more like it. My Alma Mater today is in the 50k T&R&B range. To push a kid out the door with 100,000 in debt with their PoliSci or History degree is more like robbery. (Nothing against History, mind you. Twas my major)
100G's in debt at 5% for 5 years is 1,800 per month. For 10 years it's about 1,050. Good luck with that.

It's one of the worst things I've ever seen. College tuition is just an abhorrent mistake.

As sad as it is, the only thing that will get colleges to lower their tuition will be major hits to their bottem line. It's unfortunate that HR monkeys click past applications without degrees. Colleges know that and price accordingly.

Someone mentioned awhile ago that this is the college tuition bubble and the only people it will be hurting are colleges and universities.

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-Typos courtesy of my mobile phone.

BTW, does anyone know if there is a tax deduction/credit for tuition; if so, does it only apply to college or is it also applicable to secondary school. I haven't looked into any of this yet.

Can't say I agree with that assessment. It's been bubbling for 40+ years. In the meantime, lots of hurting going on each year to kids and parents.

A few years ago, I read that Harvard could go tuition free and "pay" the students' tuition from the annual income earned on their endowment.
Why fleece them?

Mostly, it's for post-secondary education....
IRS links.
http://www.irs.gov/newsroom/article/0,,id=205674,00.html
These links are not updated for 2009 law changes yet.
http://www.irs.gov/app/understandingTaxes/teacher/hows_mod10.jsp
http://www.irs.gov/publications/p970/index.html